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2017 (2) TMI 578 - ITAT MUMBAI

2017 (2) TMI 578 - ITAT MUMBAI - TMI - Disallowance u/s.14A - Held that:- As the suo motu disallowance made by the assessee is far more than the exempt income earned by it, so,in our opinion there was no justification for making any further disallowance. Reversing the order of the FAA,we decide first ground of appeal in favour of the assessee. - Disallowance of additional depreciation - Held that:- As decided in AY.2008-09 in assessee;s own case the beneficial legislation, as in the present .....

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tly held, that additional depreciation allowed u/s.32(1)(iia) of the Act is a one-time benefit to encourage industrialisation, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting the additional allowance. We are in full agreement with such observations made by the Tribunal.. We hold that the assessee was entitled to claim 10% additional depreciation during the year under appeal. Reversing the order of the F .....

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and bulk drugs. As the issues involved in both the years are common, so,we are passing a common order.The details of dates of filing of returns,returned incomes, assessment comes etc.can be summarised as under: AY. ROI filed on Returned income Asstt.date Assessed Income 2010-11 30.09.2010 Rs.40.86 crores 09.03.2013 Rs.42.23 crores 2011-12 30.09.2011 Rs.18.37 crores 31.10.2013 Rs.20.27 crores ITA/6784/Mum/2014,AY.2010-11. 2. First effective Ground of appeal is about disallowance u/s.14 A of the .....

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llowance of ₹ 8.28 lakhs (Rs. 7.46 lakhs under the head interest expenditure and ₹ 82, 210/-on account of 0.5% of the average investments for the year under consideration). As the assessee itself had made disallowance of ₹ 2 lakhs, so, he restricted it to ₹ 6.28 lakhs. 2.1. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). Before her,it was argued that the assessee had not incurred any admission to expenses to al .....

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Industries (ITA/7088/Mumbai/2011, dated 21/11/2012) Daga Capital Management Private Ltd (26SOT603) and upheld the order of the AO. 2.2. During the course of hearing before us, the Authorised Representative (AR) argued that no interest disallowance could be made u/s.14 A when the assessee owned sufficient funds to cover of the value of investments, that the disallowance had to be restricted to the amount of exempt income earned by the assessee during the year, that for the purpose of disallowance .....

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₹ 50,944/-. He relied upon the cases of Reliance Utilities Ltd(313ITR340),HDFC Bank Ltd.(366 ITR 505) Joint Investments(372 ITR 694)ACB India(374 ITR 108) Cheminvest Ltd. (378 ITR 33).The Departmental Representative (DR) supported the order of the FAA. 2.3. We have heard the rival submissions and perused the material before us. We find that during the year under consideration the assessee had claimed exemption of ₹ 50,944/-u/s.10 (34) of the Act, that it had made a disallowance of &# .....

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ad interest expenditure should be made. In the case of Reliance Utilities the Hon ble Bombay High Court has held as follow: if there were funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. Section 14A was introduced to prevent the misuse of double deductions i.e. claiming exemptions a .....

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the assessee in relation to the tax exempt income .This proportion or portion of the exempt income surely cannot swallow the entire amount. As the suo motu disallowance made by the assessee is far more than the exempt income earned by it, so,in our opinion there was no justification for making any further disallowance. Reversing the order of the FAA,we decide first ground of appeal in favour of the assessee. 3. Second Ground of appeal is about disallowance of additional depreciation of ₹ 1 .....

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rily required to be allowed, that the provisions of section 32 (1) (iia) did not stipulate that the additional depreciation had to be allowed only in the first year of claim, that the proviso to section 32 (1) did not take away the balance claim even if the assets were put to use for less than 180 days,that it was an incentive provision and had to be interpreted liberally. 3.2. After considering the submission of the assessee and the assessment order, the FAA held that the assessee had claimed 5 .....

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t only in the year of acquisition of assets, that the additional depreciation had to be computed with reference to the actual cost, that the concept of actual cost would not survive in the second year/subsequent years of acquisition of the assets. She referred to the case of Brakes India Ltd (96 DTR 281) and stated that the assets in question were required in the AY.2009-10 and were put to use in the same year, that the additional depreciation could be claimed in the year of acquisition and not .....

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AA. 3.4. We have heard the rival submissions and perused the material before us.We find that the FAA had disallowed the claim made by the assessee u/s.32(1)(iia),that she was of the opinion that it was available for one year only i.e.in initial year,that the assessee had claimed 50% of the deduction as the machinery was used for a period less than 180 days in the last AY.,that it had claimed the balance deduction in the year under appeal.We find that in the case of Rittal India Pvt. Ltd. -No.1(s .....

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iod of less than 180 days,that u/s. 32(1)(iia), read with the second proviso to section 32(1)(ii) of the Act, for the AY. 2007-08,the assessee was granted benefit of 50% of the 20% of the amount of depreciation allowable.Dispute arose with regard to the allowance of the balance 10 % depreciation in the next AY. i.e. for the AY.2008-09.The AO, as well as the FAA disallowed the claim of the assessee, whereas the Tribunal,allowed the appeal of the assessee.Challenging the same,the Revenue filed app .....

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n allowed u/s.32(1)(iia) is a one-time benefit to encourage industrialisation and the relevant provisions has been construed reasonably and purposive without appreciating that the additional depreciation is allowed in the year of purchase and if in the year of purchase the assessee is eligible only for 50 per cent depreciation,the balance 50 per cent.cannot be carried forward for the subsequent year on the claim cannot be allowed in any other year ?" The Hon ble Court after referring to the .....

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he aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialisation, by either setting up a new industrial unit or by expanding the existing unit by purchase of n .....

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at "a further sum equal to 20 per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii)". The word "shall" used in the said clause is very significant. The benefit which is to be granted is per cent. additional depreciation. By virtue of the proviso referred to above, only per cent.can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that th .....

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t the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one AY., if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balance of the benefit in the subsequent AY.. The Tribunal, in our view, has rightly held, that additional depreciation allowed u/s.32(1)(iia) of the Act is a one-time benefit to encourage industrialisation, and the provisions r .....

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